This was the highest monthly inflow since January 2008, when they had invested Rs 7,703 crore in stock markets.

Industry experts attributed the inflows in equities to improvement in market sentiments primarily due to the new government's reforms agenda. Besides, retail participation in equity schemes has increased significantly in the last few months.

"The money in equities has been coming in the past two months and mostly in the second half of May after the General election results," said a market expert.

The buying of shares in August coincided with a rise of 2.86 per cent in the BSE's benchmark Sensex.

The financial year ended March 31, 2014 also marked the fifth consecutive year of net outflows by mutual funds in the equities after pumping in a net amount of Rs 6,985 crore in the share market in 2008-09.